Pathwise Construction of Affine Processes

Nicoletta Gabrielli and Josef Teichmann

Chapter 8 in Innovations in Insurance, Risk- and Asset Management:Proceedings of the Innovations in Insurance, Risk- and Asset Management Conference, 2018, pp 185-213 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Based on the theory of multivariate time changes for Markov processes, we show how to identify affine processes as solutions of certain time change equations. The result is a strong version of a theorem presented by J. Kallsen in [1] which provides a representation in law of an affine process as a time–change transformation of a family of independent Lévy processes. This also leads to a new perspective on strong approximations for affine processes.

Keywords: Insurance; Actuarial Science; Risk Measure; Reinsurance; Copula; Replicating Portfolio; Bayesian Finance; Risk Classification; Stochastic Dominance; Dynamic Hedging; Autoregressive Hidden Markov Models; Exchange-Traded Funds; Uncertainty Quantification; Fixed Income; Stochastic Processes for Finance (search for similar items in EconPapers)
JEL-codes: G22 G32 (search for similar items in EconPapers)
Date: 2018
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